Stats

May 12, 2017

The following article was written by Sound Money Defense League Assistant Director Jp Cortez. It was originally published at www.soundmoneydefense.org.

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In a newsletter published in 1970, economist Murray Rothbard wrote, “It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.”

This is an oft-quoted platitude within circles of libertarian philosophy and Austrian economics.

Today, we are seeing the embodiment of Rothbard’s fears. The woeful state of economic understanding has reached a critical mass. Economics has taken a back seat to issues deemed more important. What’s worse is that when economics is discussed, millennials tend to lean socialist.

I have a vested interest in seeing economics and sound money flourish as I work in the field. Yes, I believe that tying a nation’s currency to gold keeps government spending in check. This is hardly professional bias though, as we all have a vested interest in seeing economics and sound money championed, many just don’t recognize it. This piece is aimed at anyone with a vested interest in maintaining a standard of living higher than that of the depression-era breadline vagabond. Economics transcends race, gender, and political identification.

Let’s begin by examining the first of two reasons that good economics is paramount.

Good Economics Is Important Because We Are Seeing a Rise in Bad Economics

Bernie Sanders’s 2016 campaign had an equal but opposite effect. From teenagers to senior citizens, many loved Sanders’s critique of the broken system that favors the wealthy and stifles the poor. His “solutions” are abysmal, yet despite the countless examples of current (and more importantly, collapsed) socialist-Marxist/Leninist calamities, a self-described socialist found a foothold in the United States.

The revolution inspired by Sanders is anti-intellectual. The “economics” that stemmed out of the Sanders campaign was not economics at all. His school of economics was built on people shouting about their feelings and promoting egalitarianism for the sake of egalitarianism.

Good economics is grounded in axiomatic truths and empirical facts about the world around us. Sound money keeps governments and central banks (called the Federal Reserve in the US) from endless money printing and devastating inflation. Yes, that means the government won’t be able to provide every service that one desires. That is a good thing. Government is the bastion of inefficiency and the epitome of waste. Strictly from an economics standpoint, the market is far better suited at providing products and services.

The espousal of socialist policies in economics is dangerous and irresponsible. Fortunately, it doesn’t take much intellectual firepower to write off socialism as wildly inefficient. But it does take some. Socialism falls apart quickly when one understands the economic calculation problem, which explains the importance of prices based in subjective value in a free market system and explains how centrally planned economies, devoid of market prices, are doomed to suffer from inefficiencies in the form of widespread shortages and surpluses. Without these rudimentary economic blocks, “free college, health care for everyone, and massive taxation on the 1 percent to pay for these policies” sounds desirable.

Socialism has been proven to be a terrible economic policy repeatedly. At some point, the value of human lives outweighs the desire for a politician to conduct a social experiment on how quickly he or she can rid their country of any and all valuable resources. That point is now. We must understand that socialism is an exercise in futility and inefficiency. Understanding good economics kills off the allure of central planning that continues to be peddled by politicians on the left. In fairness, understanding good economics helps wade past the bad economics posited by the right as well.

For a multitude of reasons, it’s a good idea to take a politicians’ statements with grains of salt. As far as economics goes, economist Thomas Sowell said it better than I ever could.

The first lesson of economics is scarcity: there is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.

Sound economics based in sound money policies make it possible to eat reasonably priced meals because inflation tends to be lower in countries that practice these policies. Sound money policies make enacting socialist policies difficult. Understanding fundamental economics is the lynchpin to cultivating an environment conducive to having meaningful debate on other social issues. Which brings us to the second reason why economics is crucial.

Economics Is the Most Important Social Issue of Our Time

We should start by understanding that economics is a social issue. In fact, economics is the social issue. No issue influences individuals (read: all the individuals) within a society more than its economic practices.

Living in the United States in 2017 means exposure to all sorts of social issues including – but not limited to – same sex marriage, police brutality, safe spaces, drug legalization, and firearms ownership. To be sure, these issues are important and should be examined with sober eyes. But the issue of economics supersedes this list and every other list.

I believe consenting individuals should be allowed to do whatever their hearts desire so long as they aren’t violating the rights of another. I stand in solidarity with those who favor legalized same-sex marriages. I stand with those who want to see marijuana legalized nationwide and those who want to own automatic weapons.

But herein lies the danger of ignoring economics at the expense of other issues: Being “allowed” to smoke marijuana legally seems insignificant when a loaf of bread costs a month’s salary and your loved ones are dying of starvation, doesn’t it? I concede the subjective nature of this evaluation, but if I had to choose between the legality of same sex marriages and economic stability, I would choose economic stability without pause. Not because I don’t value personal freedom to do as one wishes, but because I understand that with economic stability comes the ability to fight another day for other issues.

Brazil, according to Bloomberg, was the second-worst economic performer of 2016. The other side of the coin is more uplifting: Brazil recognizes same-sex unions; allows same-sex marriages; allows adoptions by same-sex couples; allows individuals who identify as LGBT to serve in the military; and so on. Brazil’s removal of the proverbial shackles on homosexuals to live as they see fit is a big win for personal liberty, undoubtedly.

But one can’t help but wonder if the married same-sex couple in Brazil suffering from the terrible economic policies enacted by their country thinks, “13.2 percent of our entire country’s population is unemployed. That’s close to what the US faced between 1930-1931 as the Great Depression destroyed their economy. We can’t afford to feed ourselves or our family and we’re subjected to danger and crime as others are desperate to obtain food and money. But hey, at least the government recognizes our marriage!”

Greece is another example of the result of poor economic policies. Riots and crippling tax hikes to pay for irresponsible economic policies are commonplace in Greece, but hey, at least small amounts of cannabis have been decriminalized, right?

I don’t mean to belittle the importance of issues such as these. But as millennials, as members of the citizenry, and as people with a stake in the economic health of the nation we inhabit, our efforts are often misplaced. Sound economic policies should be pursued with at least the same amount of fervor as the myriad issues that don’t potentially end in economic collapse, death, crime, and general hysteria.

America finds itself on the cusp of revolution, but not necessarily the kind you might imagine. The revolution we are headed towards is an intellectual one. Good economics lies at the heart of this revolution.

Without good economics, we are powerless against the abuses of the Federal Reserve, the central bank that intentionally devalues the money in your bank account while it finances foreign wars and domestic programs that the government wouldn’t have the means to pay for otherwise. Without good economics, we are defenseless against the bad economic policies that lead to extreme levels of pillaging that socialists lovingly refer to as taxation. Without good economics, we subject ourselves to tangible, real-life danger and lose the opportunity to bring about the changes we wish to see.

Important as they are, our political divisions are the iceberg’s tip. When pollsters ask the American people whether they are likely to vote Republican or Democrat in the next presidential election, Republicans win growing pluralities. But whenever pollsters add the preferences “undecided,” “none of the above,” or “tea party,” these win handily, the Democrats come in second, and the Republicans trail far behind. That is because while most of the voters who call themselves Democrats say that Democratic officials represent them well, only a fourth of the voters who identify themselves as Republicans tell pollsters that Republican officeholders represent them well. Hence officeholders, Democrats and Republicans, gladden the hearts of some one-third of the electorate — most Democratic voters, plus a few Republicans. This means that Democratic politicians are the ruling class’s prime legitimate representatives and that because Republican politicians are supported by only a fourth of their voters while the rest vote for them reluctantly, most are aspirants for a junior role in the ruling class. In short, the ruling class has a party, the Democrats. But some two-thirds of Americans — a few Democratic voters, most Republican voters, and all independents — lack a vehicle in electoral politics.

Our ruling class’s agenda is power for itself. While it stakes its claim through intellectual-moral pretense, it holds power by one of the oldest and most prosaic of means: patronage and promises thereof. Like left-wing parties always and everywhere, it is a “machine,” that is, based on providing tangible rewards to its members. Such parties often provide rank-and-file activists with modest livelihoods and enhance mightily the upper levels’ wealth. Because this is so, whatever else such parties might accomplish, they must feed the machine by transferring money or jobs or privileges — civic as well as economic — to the party’s clients, directly or indirectly. This, incidentally, is close to Aristotle’s view of democracy. Hence our ruling class’s standard approach to any and all matters, its solution to any and all problems, is to increase the power of the government — meaning of those who run it, meaning themselves, to profit those who pay with political support for privileged jobs, contracts, etc. Hence more power for the ruling class has been our ruling class’s solution not just for economic downturns and social ills but also for hurricanes and tornadoes, global cooling and global warming.

Donald Trump threatens our "ruling class" grip on supremacy. Democrats were taken in when Trump launched his bid for the presidency. They thought he would be the patsy, the walkover candidate, the doormat, the path of least resistance on Hillary's pre-ordained stroll to the White House. But he won. The ruling class is outraged. All you have to do listen to Stephen Colbert.

Whether Trump can successfully halt the American decline and return power to the American people remains to be seen. But he, like Codevilla, understands what we are up against. It's no accident that laws and taxes have gotten enormously complex.

By taxing and parceling out more than a third of what Americans produce, through regulations that reach deep into American life, our ruling class is making itself the arbiter of wealth and poverty. While the economic value of anything depends on sellers and buyers agreeing on that value as civil equals in the absence of force, modern government is about nothing if not tampering with civil equality. By endowing some in society with power to force others to sell cheaper than they would, and forcing others yet to buy at higher prices — even to buy in the first place — modern government makes valuable some things that are not, and devalues others that are. Thus if you are not among the favored guests at the table where officials make detailed lists of who is to receive what at whose expense, you are on the menu. Eventually, pretending forcibly that valueless things have value dilutes the currency’s value for all.

Laws and regulations nowadays are longer than ever because length is needed to specify how people will be treated unequally. For example, the health care bill of 2010 takes more than 2,700 pages to make sure not just that some states will be treated differently from others because their senators offered key political support, but more importantly to codify bargains between the government and various parts of the health care industry, state governments, and large employers about who would receive what benefits (e.g., public employee unions and auto workers) and who would pass what indirect taxes onto the general public.

Fixing health care and reforming taxes are key first steps on the road to America's recovery.